Duopoly (from Latin duo - two and Greek pōlēs - seller)

a term used in bourgeois political economy to refer to the market structure of a branch of the economy in developed capitalist countries, in which there are only two suppliers of a certain product and there are no monopolistic agreements between them on prices, markets, production quotas, etc. The concept of market reflects various forms of market organization. The first form is a market dominated by two large commercial and industrial companies between which there is a secret agreement that ensures the receipt of maximum profit through unequal exchange. This situation is typical of the early 20th century. The second form is the market modern industries mass production, which is also dominated by two companies. Between them there is usually a tacit agreement on monopoly prices and non-price competition. The third form is a market in which there are two suppliers, but there are no monopolistic agreements between them. This is possible in two situations: either as a temporary state of the market in the initial period of production of a new product and a "trial of strength" of two suppliers, or as a state of fierce competition in the transition from simpler to more developed forms of monopoly. This form is used by some bourgeois economists for apologetic purposes to prove the possibility of a permanent absence of monopoly in conditions of highly concentrated production. The majority of modern bourgeois economists, on the other hand, consider debt a kind of monopoly (which is true).

The economic and mathematical study of dialectics began as early as the 19th century. A. Cournot, J. Bertrand (France) and F. Edgeworth (Great Britain). In the 30s. 20th century G. Shtakkelberg (Germany) characterized certain types of diocese that depend on the behavior of duopolists. Modern theory D. was formed under the influence of the theories of monopolistic competition by E. Chamberlin (USA), imperfect competition by J. Robinson (Great Britain), and the works of R. Triffin (USA) and began to take into account the more complex nature of real market conditions(interdependence between industries, shifts in supply and assets, differences in the types of markets and market institutions, the level of information about the market, etc.).

Lit.: Chamberlin E. Kh., Theory of monopolistic competition, trans. from English, M., 1959; Zhams E., History of economic thought of the twentieth century, trans. from French, Moscow, 1959; Seligman B., The main currents of modern economic thought, trans. from English, M., 1968; Neumann J., Morgenstern O., The theory of games and economic behavior, Princeton, 1944.

Yu. A. Vasilchuk.

Great Soviet Encyclopedia. - M.: Soviet Encyclopedia. 1969-1978 .

See what "Duopoly" is in other dictionaries:

- (doupoly) A market in which there are only two producers or sellers of a given good or service and many buyers. In practice, the profits that can be made from this form of imperfect competition are usually less than... Glossary of business terms

A type of industry market where there are only two sellers and many buyers. It is believed that the profits that can be obtained as a result of such imperfect competition are less than those that would be received if two ... ... Financial vocabulary

- (duopoly) A market in which there are only two sellers, each of which must take into account the possible responses of the other. In a Cournot duopoly, each seller assumes that the competitor will maintain the same volume... ... Economic dictionary

- (from Latin: two and Greek: I sell) a situation in which there are only two sellers of a certain product, not interconnected by a monopolistic agreement on prices, markets, quotas, etc. This situation was theoretically ... ... Wikipedia

duopoly- The situation in the market, where there are only two manufacturers offering one product. [JSC RAO "UES of Russia" STO 17330282.27.010.001 2008] duopoly A market mechanism in which two sellers of the same product operate (this rather abstract ... ... Technical Translator's Handbook

- (from Latin duo two and Greek poleo I sell) an economic term that denotes an economic structure in which there are only two suppliers of a certain product that are not interconnected by a monopolistic agreement on prices, markets, quotas, etc ... Big Encyclopedic Dictionary

Duopoly- a market mechanism in which two sellers of one product operate (this rather abstract case is often used, due to its visibility, when modeling market processes). D.'s analysis, bearing the name of O. Cournot and proposed by him in ... ... Economic and Mathematical Dictionary

duopoly- Exclusive control over the supply of products to a specific market and service from two suppliers that dominate the this market and thereby determine the prices and the scale of supplies ... Geography Dictionary

Duopoly- (from lat. duo two + gr. poleo I sell; eng. duopoly) a situation in which there are two manufacturers on the commodity market offering identical products (goods) ... Encyclopedia of Law

AND; and. [from lat. duo two] A market dominated by two sellers of a particular product or service that are not bound by agreements on prices, markets, etc. * * * duopoly (from Latin duo two and Greek pōléō I sell), an economic term, ... ... encyclopedic Dictionary

DUOPOLY- (from Latin: two and Greek: I sell) a situation in which there are only two sellers of a certain product, not interconnected by a monopolistic agreement on prices, markets, quotas, etc. This situation was theoretically ... ... Big Economic Dictionary

Books

• Microeconomics for advanced. Problems and Solutions, A. P. Kireev, P. A. Kireev. The collection contains tasks on the main sections of microeconomics: consumer theory, producer theory, market theory (free competition, monopoly), general economic equilibrium, ...

Cournot model, general information

short term

Conclusions on the model

Cournot equilibrium

main feature duopoly models (for simplicity, there are only 2 firms in the market) is that the revenue and, consequently, the profit that the firm will receive depends not only on its decisions, but also on the decisions of the competing firm, which is also interested in maximizing its profits.

Cournot model

There are many models of oligopoly, and none of them can be considered universal, nevertheless, they explain the general logic of the behavior of firms in this market. The first duopoly model was proposed by the French economist Augustin Cournot in 1838.

The Cournot model analyzes the behavior of a duopolist firm on the assumption that it knows the volume of output that its only competitor has already chosen for itself. The task of the firm is to determine its own size of production, in accordance with the decision of the competitor as a given. On fig. 9.2 it is shown, what behavior of firm in such conditions would be.

Rice. 9.2.Behavior of a duopolist firm in the short run

short term

For simplicity, it was assumed that both duopolists are exactly the same, no different companies. Second, we assumed that the marginal cost of both firms is constant: the MC curve is strictly horizontal.

Let us first assume that firm No. 1 knows for sure that the competitor is not going to produce anything at all. In this case firm #1 is effectively a monopoly. The demand curve for its products (D0) will therefore coincide with the demand curve for the entire industry. Accordingly, the marginal revenue curve will take a certain position (MR0). Using the usual rule of equality of marginal revenue and marginal cost MC = MR, firm No. 1 will set its optimal production volume of 50 units.

And if firm No. 1 becomes aware that its competitor himself intends to produce 50 units. products? At first glance, it may seem that by doing so he will exhaust the entire volume of demand and force firm No. 1 to abandon production. However, it is not. If firm No. 1 sets a price P1 for its products, then there really will be no demand for it: those 50 units that the market is ready to accept at this price have already been supplied by firm No. 2. But if firm No. 1 sets a price P2, then the total demand market will be 75 units. (see industry demand curve D0). Since firm #2 offers only 50 units, firm #1 will have 25 units left. If the price is lowered to P3, then, repeating similar reasoning, it can be established that the market demand for the products of firm No. 1 will be 50 units.

It is easy to understand that by sorting through different possible price levels, we will also obtain different levels of market demand for the products of firm No. 1. In other words, a new demand curve D1 will form for the products of firm No. 1 and, accordingly, a new marginal revenue curve MR1. Using the MC = MR rule again, a new optimal production volume of 25 units can be determined.

Conclusions of the Cournot Model

The volume of production in an oligopoly

In an oligopoly, output is greater than what it would be under pure monopoly, but less than it would have been under perfect competition.

QM

Indeed, our two firms produce a total of 75 units, while a monopoly would produce only 50 units. And with perfect competition, the output would be 100 units.

Prices in an oligopoly

In turn, prices under an oligopoly are lower than monopolistic ones, but exceed competitive prices:

PM>Polig>PC.

The graph clearly shows that the price that firm No. 1 will set and which firm No. 2 will be forced to support if it wants to sell its 50 units. products, will be established at the level of P2. After all, only at this price level will the market be able to absorb all 75 units produced by both firms. And the price P2 is lower than the monopoly price P1 and higher than the competitive level P3.

Oligopolistic profits

The total oligopolistic profits of both duopolists will be lower than those that a single monopoly firm would have received in the same market, although the trend towards positive economic profits will continue.

PM>Polig> 0

General conclusion

Each level of output of one of the duopolists corresponds to a special demand curve for the products of the second duopolist. In other words, for any oligopolist, the size of the market is not a constant value, but directly depends on the decisions of competitors.

Cournot equilibrium

The level of production set by the company on the basis of the established size of the production of a competitor, each time turns out to be such that it forces the latter to reconsider it. This causes a new adjustment in the volume of production of the first firm, which in turn changes the plans of the second again, that is, the situation is unstable, non-equilibrium.

However, there is also a point of stable equilibrium - this is the point of intersection of the reaction curves of both firms (point O on the graph). In our example, firm #1 produces 33.3 units, assuming that the competitor will produce the same number. And for the last issue 33.3 units. is indeed optimal. Each firm produces the output that maximizes its profits for a given competitor's output. It is not profitable for any of the firms to change the volume of production, therefore, balance is stable. It is called the Cournot equilibrium in theory.

Under Cournot equilibrium is understood as such a combination of output volumes of each of the firms, in which none of them has incentives to change their decision: the profit of each firm is maximum, provided that the competitor maintains this output volume. Or in another way: at the Cournot equilibrium point, the expected output of any of the firms by competitors coincides with the actual output and, at the same time, is optimal.

Duopoly- this is market structure where two sellers, protected from additional sellers, are the only producers of a standardized product that has no close substitutes.

Duopoly models illustrate how an individual seller's proposals for a rival's response affect equilibrium output. The Cournot duopoly model assumes that each of the two sellers assumes: that its competitor will keep its output unchanged, at the current level.

The Cournot model is based on two main assumptions about the behavior of a firm in a duopoly: first, each firm is aimed at maximizing its profit; and second, each of the firms assumes that as its own output changes, the other firm will maintain its output at a substantial level. Under these conditions, the achievement of equilibrium in the market will look as follows. Let's assume that there are only two sellers ("A" and "B") of an identical product in the region. Entry to the market of this product is not possible for other sellers. Assume that both sellers can produce this product at the same cost. Let us assume that firm A starts production first, owns the entire market, and assumes that there will be no rivals in the market. In this case, firm A behaves like a monopoly, and therefore both its volume and price are monopoly. Immediately after Firm A begins production, Firm B appears. Other firms are not expected. Firm "B" assumes that firm "A" will not change the achieved volume of production and sales. Firm B will increase market supply, which will cause a decrease in the price of this product. Firm B will increase its output every period, and Firm A will decrease its output every month. The final equilibrium output of each firm will reach 1/3 of the competitive output. The total market output is equal to 2/3 of the equilibrium competitive output for a given demand for the good. Consequently, the process of achieving equilibrium in the market is as follows: one of the enterprises chooses the volume of output that maximizes its own profit, then the second enterprise, assuming that the level of output remains unchanged, determines its own profit-maximizing sales volume. This market adjustment process goes through several "action and response" stages until firms reach equilibrium. This is the Cournot equilibrium for a duopoly.

Cournot equilibrium- this is a non-cooperative equilibrium: each firm makes decisions that give the greatest possible profit from the given actions of its competitors. Equilibrium in the Cournot model can be represented through response curves. The response curve shows the maximizing output that will be produced by one firm given the output of another rival firm.

The Cournot model establishes a direct relationship between the performance of industries, as measured by the difference between price and industry-weighted average marginal cost (MC), and the level of market concentration, as measured by the Herfind-la-Hirschman index:

where: H is the Herfindahl Hirschman index, an indicator that determines the degree of market concentration . (2.22)

where. S1 is the market share of the firm providing the largest volume of supplies; S2 is the market share of the next largest supplier firm, etc.

Therefore, the underlying Cournot model predicts a tendency for price to fall towards marginal cost as the number of sellers increases (i.e., in an industry with less concentration, prices are more likely to be closer to what would have been the result of competition). Addition of conjectural changes ranks oligopolistic pricing schemes from competitive to monopoly.

The main problem in determining the situation of pricing for oligopolistic market consists in a better understanding of the determinants of assumptions about the behavior of firms in specific conditions. Game theory is recognized as the main tool for solving this problem.

A better understanding of the patterns of behavior of a firm in an oligopolistic market allows the analysis of a duopoly, i.e. The simplest oligopolistic situation is when there are only two competing firms in the market. The main feature of duopoly models is that the revenue and, consequently, the profit that the firm will receive, depend not only on its decisions, but also on the decisions of the competing firm, which is also interested in maximizing its profits. The decision-making process in a duopolistic market is like home analysis of a pending chess game, where the player is looking for the strongest responses to his opponent's possible moves.

There are many models of oligopoly, and none of them can be considered universal. Nevertheless, they explain the general logic of the behavior of firms in this market. The first and still relevant model of the duopoly was proposed by the French economist Augustin Cournot in 1838 in the book “An investigation of the mathematical principles of the theory of wealth”.

The Cournot model allows us to analyze the behavior of a duopolist firm on the assumption that it knows the volume of output that its only competitor has already chosen for itself. The task of the firm is to determine the size of its own production, in accordance with the decision of the competitor as a given.

The figure shows what the firm's command would be under such conditions. In order not to complicate the graph, we made two additional simplifications. First, they accepted that both duopolists are exactly the same, no different firms. Second, we assumed that the marginal cost of both firms is constant: the MC curve is strictly horizontal. The latter assumption, as shown in the chapter on costs, is not so unrealistic. Rather, it can be said that it limits the analysis to the normal level of capacity utilization. That is, on the MC curve, only the middle part is considered, which lies near the technological optimum and really looks like a horizontal straight line.

The analysis of the behavior of the duopolist in the Cournot model was staged. First, let one of the oligopolists (firm No. 1) know for sure that the second competitor does not plan to produce any products at all. In this case, firm No. 1 will effectively become a monopoly. The demand curve for its products (D 0 ) coincides with the demand curve for the entire industry. Accordingly, the marginal revenue curve will take a certain position (MR 0 ). Using the usual rule of equality of marginal revenue and marginal cost MS = MR, firm No. 1 will set the optimal volume of production for itself (in the case shown in the graph - 50 units) and the level of yen (R 1 ).

Well, what happens if the next time firm No. 1 becomes aware that its competitor himself intends to produce 50 units. products at a price P 1 ? At first glance it may seem that by doing so he will exhaust the entire volume of demand and force firm No. 1 to abandon production. Having carefully examined the graph, however, we will see that this is not the case. If firm #1 also sets the price R 1 , then there really will be no demand for its products: those 50 units that the market is ready to accept at this price have already been supplied by firm No. 2. But if firm No. 1 installs more low price P 2, then the total demand of the market will increase (in our example it will be 75 units - see the industry demand curve D 0), Since firm No. 2 offers only 50 units, then firm No. 1 will have 25 units. (75 - 50 = 25). If the price drops to R 3 then, repeating similar reasoning, we can establish that the market demand for the products of firm No. 1 will be 50 units. (100 - 50 = 50).

It is easy to understand that, sorting through different possible price levels, we will also obtain different levels of market demand for the products of firm No. 1. In other words, a new demand curve will form for the products of firm No. 1 (on our chart - D 1) and, accordingly, a new marginal curve income ( MR 1 )> Using the rule again MS =MR, it is possible to determine a new optimal production volume (in our case, it will be 25 units - see Fig. 9.2).

Already at this stage of the analysis, the Cournot model allows us to draw important economic conclusions.

1. Under oligopoly, the amount of arbitrariness is greater than the level that would be established under pure monopoly, but less than it would be under perfect competition:

Qm

A smaller output of products under oligopoly than under perfect competition, in fact, does not require proof: this is the case in any market of imperfect competition. So, in our example, oligopolists will release 75 units. products. And with perfect competition, output would be greater. Recall that under perfect competition, the demand and marginal revenue curves are the same. (D = MR), therefore, the equilibrium point according to the rule MS = MR should be established at the intersection of curves D and MC, which, as can be seen on the graph, will cause the release of 100 units. But the fact that the oligopolistic output will exceed the monopoly output is also understandable. Indeed, in addition to the volume of production that the monopolist would have limited output (50 units), the output of the second producer (25 units) has also been added.

2.Prices in an oligopoly are lower than monopoly prices, but higher than competitive prices:

R m >P olig > P c (9-2)

The economic mechanism leading to the establishment of the described level of yens is also clear. By limiting production and inflating the yen, the monopoly leaves a part of the market demand unsatisfied. This remainder serves as a market for the second duopolist (as well as the third, fourth and further competitors, if we move from a duopoly model to a multi-company oligopoly), allowing him to produce additional output, if, of course, he reduces the yen below the monopoly level (on the chart -

from R 1 to R 2 ). At the same time, its yen will be higher than the competitive price level (P 3).

the total profits of both duopolys will be below the profits that a single firm in the same market would receive* monopolist.

P m >n olig >0 (9-3)

We will again refrain from commenting on the general tendency of imperfectly competitive markets to make economic profits. The fact that their level is lower than that of monopolies is easiest to prove from the opposite

As you know, the MC = MR rule ensures profit maximization. At the very beginning of the analysis of the Cournot model, we made sure that if only one monopolist firm operated on the market (the situation in which it is known about the second duopolist that he does not plan to release products is, in fact, tantamount to a monopoly), guided by this rule, it would establish a certain volume production and price levels. For any other volume of output (and price level), the profit will be less. But after all, the intervention of the second duopolist, the start of production by this second firm, just leads to the deviation of production volumes and prices from the optimum. Consequently, the total profit of the two duopolists will not be as great as that which a pure MONOPOLIST would be able to get.

The general conclusion, which is also of great practical importance for the manager, is also obvious: under an oligopoly, there is not one, but many demand curves for the firm's products, namely, each level of output of one of the oligopolists corresponds to a special demand curve for the products of the other oligopolists.

Recall how events developed in the model: knowing that the second firm does not plan to produce, the first behaved like a monopolist and had a demand curve D 0 . As soon as firm No. 2 changed its mind and released 50 units. products, for firm No. 1 there is a new demand curve O,. It is obvious that the reasoning that we carried out in relation to the release by the second firm of 0 and 50 units. products, can be repeated for a variety of levels of production of this company. Each new choice of a given firm will generate a new demand curve for its competitor's product. The graph, in particular, shows the demand curve for the products of firm No. 1 (see D 2), which will arise when firm No. 2 exactly 75 units. products. In this case, the optimal production volume for firm No. 1 itself will be 12.5 units. products (intersection MR 2 and MO.

In other words, for any oligopolist, the volume of the market is not a constant value, but directly depends on the decisions of competitors.

To better understand all the consequences of this pattern, let's turn to the figure.

Let's pay attention to the unusual axes used on it. The horizontal scale is for one firm, and the vertical for another. In such axes, the size of the output of firm No. 1 can be depicted as a response curve to the volume of production of firm No. 2. Similarly, firm #2's output can be represented as a function of firm #1's output:

Q(1) = f Q(2),

Q(2) = φ Q(1) where

Q(1) - the size of the production of firm No. 1; Q(2) - the size of the production of firm No. 2.

With this formulation of the problem, we are actually trying to understand what will happen from the simultaneous efforts of two firms to adjust their output to the output of another firm.

Let's see if both firms can establish mutually acceptable production volumes. We took all the data for the chart from the previous example. So, if it is known about firm No. 2 that it is going to produce 75 units. products, then firm No. 1 will decide on the release of 12.5 units. (dot BUT). But if firm No. 1 really releases 12.5 units. products, then, as can be seen in the graph, firm No. 2, in accordance with its reaction curve, should release not 75, but 42.5 units. (dot AT). But such a level of output by a competitor will force firm No. 1 to produce not 12.5 units, as it was going to, but 29 units. products (point O, etc.

It is easy to see that the level of production that the firm sets on the basis of the existing size of the competitor's production, each time turns out to be such that it forces the latter to reconsider this level. This causes a new adjustment in the volume of production of firm No. 1, which in turn changes the plans of firm No. 2 again. That is, the situation is unstable, non-equilibrium.

However, there is also a point of stable equilibrium - this is the point of intersection of the reaction curves of both firms (on the graph - the point O). In our example, firm No. 1 produces 33.3 units. based on the fact that the competitor will release the same amount. And for the last issue 33.3 units. is indeed optimal. Each firm produces the volume of output that maximizes its profits for a given output of the competitor. It is not profitable for any of the firms to change the volume of production, therefore, the equilibrium is stable. It is called the Cournot equilibrium in theory.

Under Cournot equilibrium is understood as such a combination of outputs of each firm, in which none of them has incentives to change their decision: the profit of each firm is maximum, provided that the competitor maintains this output. or in another way, at the Cournot equilibrium point, the output of any of the firms expected by competitors coincides with the actual output and, at the same time, is optimal.

The existence of Cournot equilibrium indicates that an oligopoly as a type of market can be stable, that it does not necessarily lead to a series of continuous, painful redistribution of the market by oligopolists. The mathematical theory of games, however, shows that the Cournot equilibrium is achieved under some assumptions about the logic of the behavior of duopolists, but not under others. At the same time, the understandability (predictability) of the actions of the partner-competitor and his readiness for cooperative behavior in relation to the opponent is of decisive importance for achieving balance.

The simplest oligopolistic situation is when there are only two competing firms in the market. The main feature of duopoly models is that the revenue and profit that a firm will receive depends not only on its decisions, but also on the decisions of a competing firm interested in maximizing its profits. The first duopoly model was proposed by the French economist Cournot in 1838.

The Cournot model analyzes the behavior of a duopolist firm on the assumption that it knows the volume of output that its only competitor has already chosen for itself. The task of the firm is to determine its own size of production. Additional simplifications are made in the model: both duopolists are exactly the same, the marginal costs of both firms are constant (the MC curve is strictly horizontal).

Let us assume that firm 1 knows that the competitor is not going to produce anything. Firm 1 is practically a monopoly. The demand curve for its products (D 0) coincides with the demand curve for the entire industry. Marginal revenue curve MR 0 . According to the rule of equality of marginal revenue and marginal cost MC=MR, firm 1 will set the optimal volume of production for itself (50 units). Firm 2 intends to produce 50 units of products. If firm 1 sets a price P 1 for its products, then there will be no demand for it. This price has already been set by firm 2. But if firm 1 sets the price P 2 , then the total market demand will be 75 units. Since Firm 2 offers 50 units, Firm 1 will have 25 units left. If the price is lowered to P 3, then the market demand for the products of firm 1 will be 50 units. By sorting through different possible price levels, one can obtain different market needs for the products of firm 1, i.e. for the products of firm 1, a new demand curve D 1 and a new marginal revenue curve MR 1 will be formed. By using the MC=MR rule, a new optimal production volume can be determined.

35. Behavior of a monopoly firm in the short and long term.

Short term. The graph reflects the process of choosing the optimal volume of production by the monopolist and the process of establishing market equilibrium in the monopolized industry. The volume of production will be established at the level Q m corresponding to the point of intersection of the curves of marginal revenue and marginal cost (MC=MR). The projection of this point on the demand curve (point O m) will also set the equilibrium price P m . Point O m reflects not only the price and quantity optimum for the firm, but also becomes the point of industry-wide market equilibrium under monopoly conditions.

With a monopoly, the degree of market imperfection reaches a maximum.

O This is especially evident in the fact that the typical consequences of imperfect competition affect this market with particular force.

1) strong underproduction of goods compared to the competitive level (QM<

2) a significant overpricing in comparison with the value that would have developed under perfect competition (PM>>PO)

This happens because the complete absence of competitors in the market allows the monopolist to limit supply so sharply that the price level rises to an economically justified (from the point of view of the monopolist) maximum.

However, it is worth noting that the monopoly charges the highest possible price for it, which is both high enough to maximize profits, but low enough to induce consumers to purchase the maximizing output.

Long term. A monopolist does not have a supply curve. The decision of the monopolist to change the scale of production depends only on the ratio of market demand curves and long-run average costs. The monopolist himself determines how many products in the industry to produce => he can vary the supply in order to maximize profits.

P
first chart: market demand does not change, then the monopolist goes into the long run if the price is above average long run costs.

Graph 2: market demand changes (customers buy more) => new curves form => new price => huge profits => the company moves into the long run if it can charge a price higher than average long run there.